State Revenues Plunge; Grants and Spending Up

Despite a substantial drop in tax revenues during 2009, state governments managed to increase spending modestly, perhaps in part because the federal government gave out more in grants that year.

The U.S. Census Bureau reports that state revenue fell from $1.6 trillion in 2008 to $1.1 trillion in 2009, representing a 30.8% decline. The fall was attributed to a drop in monies from social insurance trusts, such as funds from public employee retirement systems, unemployment insurance and workers’ compensation.

Fewer tax dollars didn’t put a halt to spending, however. Census data shows general expenditures by state governments went up 3%. An even larger jump occurred in federal grants, which rose nearly 13% in 2009 to $478 billion, most of which went to welfare programs.